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I saw this headline when I walked past a copy of the Rugby Advertiser at the weekend, and now that they have put the report up on their website I had a chance to read it properly.

Essentially, the suggestion is that ‘more affluent shoppers’ are not catered for. I’m not sure what that means, really. Yes there are a number of cheap shops, a growing number of charity shops, and the main in-town supermarkets are Asda and Morrisons, which compete on price rather than quality.

What I find, however, is that Rugby lacks mid-market shops and certain sectors. We have one independent bookshop, Hunts. Read the rest of this entry »

﻿The latest monthly unemployment figures appear, at first glance, to show a mixed picture. But, a rise in one measure and a fall in the other do not mean we can assume that overall things are about the same.

The figure that went up was the internationally recognised ILO measure, which counts everyone who is out of work and looking. It rose by 27,000 to 2.53 million, the highest since 1994 (ah, back to the Major years…) and it was taken in January and the comparison is with December. The figure that went down is the claimant count, those who are on Jobseekers Allowance (JSA). It fell by 10,200 to 1.44 million and it was taken in February and is compared to January.

He’s not having a good time of it, is he? There’s been the whole Forgemasters debacle, where he supported the cancellation of a loan that has caused damage to his own constituents in Sheffield. To make that worse, he was disingenuous about the reasons for his support. He claimed that the directors wouldn’t agree to dilute their shareholdings, until proof came that they had agreed. He said the money wasn’t there, until proof came out that the Treasury had the money. He claimed it was done in the wrong manner, before proof came out that the civil servants had signed off the loan as being all above board.

When he ran out of excuses he ended up bumbling at the Despatch Box and calling the whole point of Prime Minister’s Questions into question (it’s not there for the personal opinions of the PM or whoever is deputising, it’s there to provide answers from the Government as a whole). One thing we do know is that a businessman from the area, who wanted to do a deal with Forgemasters before the loan came along and who and donated a large amount of money to the Tories before the election, wrote a letter to ask that the loan be cancelled.

And now he’s in a new pickle. Before the election, Vince Cable and Nick Clegg were telling voters that cutting spending too early was dangerous. “Economic masochism” he called it. But after the election, he went along with deep and immediate cuts.

For some time he was telling us that the situation had changed and things were worse than he’d thought. Yet figures that came out in June showed that the deficit was lower than expected, and we now know that economic growth was higher. He claimed that Mervyn King had a chat with him and that had changed his mind as a result of dire new information and advice from the head of the Bank of England. But Mr King has since stated that he didn’t tell Clegg anything in private that he hadn’t earlier said at a press conference that was widely reported.

Now it seems that Clegg actually changed his mind some time during the election campaign. Which means (if we can take his latest story at face value), that he spent at least some of the time lying to voters – telling them that he would oppose something that he actually secretly supported.

It’s odd, at the very time he was being hailed as a breath of fresh air, as the ‘honest’ man among the three main leaders during the televised debates, it seems that he didn’t believe what he was saying to the electorate. He was at the height of popularity in late April, and by the end of July he’s been revealed as being utterly shallow.

Meanwhile, our PM is doing a tour of countries, each of which sees him pander to their views by using undiplomatic terms to describe their rivals, leading to at the very least a lot of muttering in Israel and Pakistan.

The first estimated figures for UK GDP are out, and they show that the economy grew again between April and June, and at quite a fast rate. So, we now know that Labour left office with:

a) A deficit that was lower than expected
b) An economy that was growing faster than expected
c) Unemployment lower than expected and falling

And yet, what will our new government do? They will claim that:

a) The deficit is worse than they thought
b) The economy was ‘ruined’, by the deficit
c) We need to sack loads of people

One area of the economy that saw a surge in growth was the Construction industry. Which will be one of the areas most badly affected by government cuts such as the Building Schools for the Future programme and new housing. I really hope that we don’t end up with a new recession prompted by the cuts. The latest GDP figures mean that it would be harder to slip into recession, but they also make it pretty clear that if we do, it’s down to the Coalition.

On the national campaign, this NI thing is a bizarre one. It’s not that big a shift, but it does contribute to the long term need to narrow the budget deficit. As NI is supposed to cover unemployment benefit, state pensions and the NHS, it makes sense for a marginal increase given that all of them have increased over time and are resistant to cuts. The Tory argument (as exemplified by Duncan Crow, who thinks that personal abuse and ignorance combined make a reasonable political argument) ignores a key element, one which the government find hard to express and is not easily demonstrated over a sound-bite driven media, but is important nevertheless:

The Tory plan is to make deeper cuts in 2010 in order to pay for not increasing NI from 2011. Those cuts in spending would inevitably mean the loss of public sector jobs. This would mean less money going into the economy via their wages (even public employees need to use the private sector to buy food and other goods) and would increase pressure on unemployment. It would also mean less money going to private companies who supply the public sector. The next six-nine months are pretty important for the UK economy in terms of the recovery. Germany could slip into recession again, and so could other countries which have cut early. By April 2011 we should be through that crucial period when the recovery needs to be nurtured and the private sector is able to grow naturally, and can better absorb a marginal tax increase. It also seems to me that a mixture of measures designed to increase revenue as well as control spending are more likely to be effective than to simply try and control spending.

No-one denies that the current budget deficit is unsustainable. Most of it is caused by the recession, of course, and so the end of that will see it come down quickly – it’s already lower than expected by £11bn. However, the question that is crucial is how fast and how early we take action to further reduce it. If we don’t act at all, or act too late, then there will be more long term debt to pay off, which isn’t great. If we act too fast or too drastically, the effects on the wider economy can damage it’s capacity to recover. The problem with pretending that the public sector is separate from the ‘real’ economy is that it isn’t – they are inextricably linked. Public debt is a private asset (ie: governments borrow by selling bonds that investors buy); money that is paid to employees, public or private, goes into the cash economy as it is spent; Things that the public sector doesn’t do can have an effect on the private sector, or can draw activity into an already hard-pressed voluntary sector.

What’s more this false dichotomy doesn’t chime with the same Tory propaganda that equates the public debt issue with the national economy – it’s perfectly possible to have a large public debt and a strong economy or a low debt and a weak economy, but they seem to bang on as if they are the same thing.

My belief is that a reluctance to be seen to increase taxes is the main reason that the deficit started to grow in the years before the recession. No-one complained when new schools were being built, when NHS waiting lists came down from many months to a matter of weeks, when OAPs were given a guaranteed minimum income. But at the same time, no-one wanted to pay for those things, it seems. The tax burden has not really changed much since 1997 (indeed, it hasn’t changed much since the late 1980s), but we still have the basic problem with democracy – people will vote for more spending or lower taxes, and choose between them, but they are reluctant to vote explicitly for spending cuts or higher taxes. I’d prefer that the government had been bolder in the second term and established the principle of ‘you want it? you pay for it’. Mind you, at least we did better than the US government which slashed taxes are probably the worst time possible (as the economy was peaking and they were trying to fight two wars). In the first term, there was a budget surplus, and the long term debt was being drawn down. Keynesian principles should have been kept up, and an open means of tax increase (the 50% band, full NI on higher incomes?). Mind you, the whole of the second term was an opportunity lost – especially after 9/11.

But still, a bunch of business leaders don’t like NI going up? Not a huge surprise. Perhaps we could see what their profits are doing at the moment – M&S for example are seeing profits rise as many of us struggle, and CEO Sir Stuart Rose is very well remunerated and his successor will come in with an even higher package this summer. I’m not sure that these same businessmen would like to see VAT go up by 2.5% instead (which is what the Lib Dems allege the Tories will do if they win power).

For the benefit of the reader who complained to me that they don’t get my posts about football, here’s something to tie the game up to economincs.

It’s a tale of two football clubs. The first is Portsmouth. Pompey went into administration last week. That was the end of a process which started a few years back when they started to borrow lots of money in order to try to compete with the big Premiership sides. The borrowed money was spent on buying and paying players – quite a few of them are still there, and still need to be paid. The main sources of income for the club were ticket sales, TV fees, prize money and merchandising. Success on the pitch would being more income from all sources. But in the end, they over-extended themselves. One FA Cup and a few season in the middle of the top division did not increase income by much. But the debt was still there.

Now, let’s compare Portsmouth with the nations of Iceland and Greece. In both cases, ambitious gambles on foreign assets were placed, based on debt. In both cases, those gambles failed. In both cases, the assets themselves became a drain on the revenue budget, and so the debt spiralled up. When the repayments came due, they ended up having to take radical steps not to be completely wound up.

Now consider Man Utd. Man Utd has £700M of debt. That’s about 10x the level that Portsmouth can’t deal with. But Manchester Utd can deal with it. Why? Well, before the debt was taken out, the club was profitable. Indeed, if you remove the payment on the debt, the club is operationally profitable. It has the advantage of a larger stadium, a greater pre-existing fan-base, and a very good means of producing decent players through the youth system. It was already successful, and while it was banking on continuing that form, it has to be said that there was less of a risk that Man Utd would fail to consistently finish in the top 3 of the Premiership and do well in national and European competition than that Portsmouth would fail to establish themselves as a major player. So the debt is higher, but it is manageable

So which country or countries would be analagous to Man Utd? Well, maybe the US or UK are a stretch, but they certainly have large debts, but at the same time both have major resources and are able to keep repaying on the debts even in dark times.

Not that Man Utd (or the US and UK) do not have challenges to meet, because they do. Clearly increasing that debt is not a sustainable policy. Clearly external factors can change their positions. Clearly bringing in incompetent managers that can’t maintain performance would be a risk. And of course there will be good seasons and bad ones.

But just because Man Utd has more debt than Portsmouth (or the UK has similar national debt to Greece) does not make their situations the same.

Now that Fulham have been unbeaten in three games (and are back to the form of thrashing those weakling North-Western clubs like Burnley and Man Utd 3-0), I can wander my mind a little and think about more interesting subjects, like macro-economics…

When the recession started, Tories derided the government for saying that the UK was in ‘the best shape’ to enter the recession. I mean, having a debt:GDP ratio lower than all of the G8 bar Russia is apparently a bad thing. Who knew?

Germany went into recession ahead of the UK, and did so faster than us (indeed we were one of the last major nations to enter recession, and only did so because one quarter showed a 0.1% fall in GDP). Germany also ended up with a greater percentage drop in GDP before their recession ended. But yes, they did come up earlier, so the right could hail them as doing better than the UK. So it would be awfully inconvenient to Tories if the German recovery faltered.

The FT reports that the latest German GDP figures show 0.0% growth (hat tip to Hopi Sen). They are a whisker away from a fall in GDP (and certainly well within the margin of error). The ‘market’ expected a 0.2% increase. As Hopi points out, Germany took the decision to cut stimulus funding pretty quickly after they returned to growth. Tories (in their usual patriotic way) cheered that careful and thrifty Frau Merkel and derided the profligate Mr Brown (and the pattern was repeated in the US with Republicans beating Obama with the same stick) for Germany’s apparent better position a few months ago, and the way that they acted to stabilise fiscal policy as soon as recovery started. I suspect that these same cheerleaders for immediate cuts will be strangely quiet about the later wobble – and even less noisy if Germany does go into a ‘double-dip’ recession.

I hope that they don’t, by the way. Because Germany’s recovery would also help other nations in theirs, so a double-dip could affect everyone else. But my hopes are nothing against the harsh and powerful realities of economics. It seems that the right have completely forgotten the lessons of the 1930s, taught to them by Keynes after they tried to battle a recession by trying to cut government spending, and then to cut again as soon as a weak recovery started. I suppose it’s ironic that people who are ardent supporters of capitalism don’t have much of an idea of how it works, but unfortunately their simplistic thinking that equates a household budget to a national economy and a government’s Treasury is hard to argue against. Until it gets disproved the hard way.